Contract activities

Labour & European Law ReviewWeekly Issue 36914 May 2014

There is a service provision change under regulations 3(1)(b) of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) when “activities” cease to be carried out by one contractor and are then carried out by another. In Qlog Ltd v O’Brien and ors, the Employment Appeal Tribunal (EAT) held that the tribunal was entitled to rely on the contractual documentation between the parties when deciding whether it accurately reflected the reality of the situation.

Basic facts

Ribble, a cardboard packaging manufacturer, contracted in September 2008 with McCarthy Haulage Ltd to deliver the packaging from its base in Oldham to its UK customers. McCarthy employed the drivers, a transport manager (Mr Barnes) and four shunters responsible for providing the services.

Ribble told McCarthy in the summer of 2011 that it would not renew the contract when it expired in September. Instead it contracted with Qlog Ltd, a logistics company, which did not own any haulage vehicles and did not employ any drivers.

Qlog conceded that the shunters and Mr Barnes would transfer but not the HGV drivers as it intended to sub-contract the transport delivery services, with individual haulage providers bidding for each specific delivery required by the client. McCarthy dismissed the drivers who brought claims for automatically unfair dismissal under TUPE.

In November 2012, Ribble entered into a written agreement with Qlog stating that Qlog would engage hauliers either “on its own account or on a sub-contracted basis in order to provide the transport and distribution services to [Ribble]."

Tribunal decision

The tribunal identified that the interpretation of the term "activities" was "critical" to answering the question whether there had been a service provision change for regulation 3(1) (b) purposes.

In this case, the agreement between Ribble and Qlog was compelling evidence of Ribble’s intention. It wanted to transfer the provision for part of its transportation, delivery and distribution services from McCarthy to Qlog so that there was one provider with legal responsibility for ensuring that its goods were delivered (as the agreement of November 2012 spelt out).

The “activities” were therefore the transportation of Ribble's goods from its premises to its customers. Although the mode of carrying them out was very different when the contract was transferred to Qlog, the activity remained the same. Qlog appealed the decision.

EAT decision

The EAT dismissed the appeal, holding that the tribunal was entitled to rely on the contractual documentation between the parties when deciding whether it accurately reflected the reality of the situation. It was also for the tribunal to establish, as a matter of fact, that the activity carried on by Qlog was essentially the same as that carried on by McCarthy Ltd.

When characterising the activities undertaken by Qlog, the tribunal was also entitled to have regard to the way in which the activities were set out in the contractual documentation. This document had been written up by the parties after the arrangements between them had been in existence for over a year and was apparently seen as accurately reflecting the reality of their relationship since September 2011.

Comment

This is a helpful reminder that when considering a service provision change, a transfer can arise from a sequence of steps and the tribunal should not take so narrow a view as to forget the underlying purpose of the TUPE regulations, which is that essentially the workers must follow the work. The focus should be on the nature of the activities in question, and contractual documents can be helpful in establishing the reality of the arrangements between the parties.